In my continuing series, First-Time-Buyer Fridays, I answer a common question from a first-time buyer. If you have a question to submit, first-time-buyer or experienced investor, put one in the comments below, or fire me an e-mail at Tim@TimAyres.ca.

Q. I want to spend about $400,000 on my first home – what can I buy for that kind of money?

A. Let’s break this down and see what $400,000 would cost first. To buy a $400,000 home, you’d need 5% down at a minimum, which is $20,000. The remaining $380,000 would need to be mortgaged. If you were to get a 5-year fixed rate at 4%, amortized over 35 years, your monthly payment would be about $1675. A two-income family should be able to afford that payment.

Keep in mind that you should think long-term. While interest rates today are at historic lows, you need to think about what happens in 5 years when it’s time to renew. No one knows where interest rates will be at that point, and you should build in a comfort zone by calculating the payment at a higher rate of interest. At 5%, the same mortgage estimated above would be $1905 – at 6%, $2150, and at 7%, $2401. The risks of this can be offset by choosing a shorter amortization period (25 or 30 years, instead of 35), which would allow you to pay off more of the principal before it’s time to renew, or you could make extra payments where your budget (and mortgage terms) allow.

So, now that we’ve established what $400,000 looks like on a monthly basis, let’s have a look at what that sum would buy you in today’s market.

In the Victoria core area (Victoria, Oak Bay, Saanich, View Royal and Esquimalt) there are 27 single family homes under $400,000 as of writing this post. Most are small, and old, but there are always a few gems in this price range. There are plenty of condos under $400,000 – 384 to be exact. In the higher end of the range, there are brand new suites at The Juliet, The Ovation, The Monaco, and other brand new high end developments in the core. At the lower end of the range, older buildings (which usually mean larger suites) offer stability and peace-of-mind for less than $250,000. There are 45 townhouses in Victoria and vicinity under $400,000 as of writing, with lots of variation in style, age and location.

Further out west to Sooke is where many first-time buyers are choosing to go (here are 10 good reasons to move to Sooke.) The drive to Victoria is a little longer (but it’s nice!) and the town smaller, but that means that you get a lot more for your money. There are 49 houses for sale in Sooke under $400,000, including many brand new beautiful houses in new subdivisions. If you buy in Sooke, there is also the option of buying an older home to renovate to your liking. Older homes will most likely have a larger lot, too. There are not many condos or townhouses in Sooke, but more are being built all the time. Almost all of them are under $400,000, including the brand-new townhouses at The Pointe in Sun River Estates and waterfront condos along Kaltasin Road. As of writing, 29 condos and townhouses in Sooke under $400,000 are for sale.

I have found that first time buyers are often surprised by 1) How much they can afford, and 2) What that money will get them. There’s plenty of product out there, prices are declining, and with the Bank of Canada reporting that interest rates will remain low until at least the second half of 2010, there hasn’t been a better time to buy in a long time – if it’s right for your situation.

It may or may not make sense for you to buy right now. To get a clearer picture, or for more information about any of the homes mentioned in this post, give me a call at 250-885-0512, e-mail me at Tim@TimAyres.ca or fill in my contact form. Connect with me on Twitter at Twitter.com/TimAyres.

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This blog is administered and written by Tim Ayres. Tim Ayres is a licensed REALTOR® with Royal LePage Coast Capital Realty. Tim can be reached at 250-885-0512 or 250-642-6361. Questions? Suggestions? Visit the Contact Page and let me know.